File No. 837.51/277
The Acting Secretary of the Treasury
(
Crosby) to
the Secretary of State
Washington,
October 5, 1917.
My Dear Mr. Secretary: I enclose herewith
draft of a letter which I think should be sent to the Cuban
Minister. This letter explains the difficulties which have been met
in regard to the bonds which the Cuban Government is in position now
to deliver to this Government, and which apparently can not be
corrected except by further action of the Cuban Congress.
It is presumed that your approval of the bond issue as now authorized
may possibly refer to all of its specific terms, and consequently if
those specific terms are changed, even though only in manner made
necessary by the requirements of our own statutes, further approval
would probably be required.
If you see no objection to the reference to your Department made in
the last paragraph, or any other objection, the letter will go
forward as written.
Cordially yours,
[Enclosure—Draft]
The Acting Secretary of the Treasury
(
Crosby) to the Cuban Minister (
De Céspedes)
Washington,
October 5,
1917.
My Dear Mr. Minister: After
consultation with you and consideration of the existing legal
situation by the legal advisers of this Department, it appears
that the Secretary of the Treasury could not under the
provisions of the act of Congress approved September 24, 1917,
purchase the obligations of your Government, the issue of which
has been authorized by an act of your Congress dated July 31,
1917. That act limits the rate of interest upon the bonds
authorized to be issued at 6 per cent.
On the other hand, the Secretary of the Treasury must require of
all governments whose obligations he may purchase under its
authority an agreement that the rate of interest, whatever it
may be at the beginning of a transaction, shall from time to
time be raised, if the rates of interest paid by the United
States on its own obligations issued during the war should
increase, and the rate to be paid by a foreign government
borrowing under these conditions can not at the final stage be
less than the rate paid by the United States on its obligations.
Consequently, the Secretary of the Treasury can not admit in the
obligations purchased by him of a limitation of 6 per cent or
any other specified percentage.
I understand that the Cuban Congress will meet in the early part
of November and I suggest that, if your Government desires to
complete the sale of the $15,000,000 of bonds, under discussion,
to this Government, remedial legislation should be enacted so
that the obligations of your Government will conform
[Page 313]
in all respects to the
requirements of the statutes of the United States permitting
such loans to be made.
In the meantime I may state that the Secretary of the Treasury
has determined, with the approval of the President, to purchase
such obligations when they can be presented in conformity with
the United States statute in question to the extent of
$15,000,000. The initial interest rate would be 4¼ per cent,
with the provisions above indicated as to possible conversions
to higher rates, and the form and terms of the bonds in other
respects to be as determined by the Secretary of the
Treasury.
I am sending a copy of this communication to you to the State
Department, in order that it may be fully advised of the
situation now developed, and it goes quite without saying that
the consent of that Department to the modified bonds will be
asked for by you under the provisions of the Piatt amendment and
any undertaking on the part of the Secretary of the Treasury
concerning them is subject to such approval by the State
Department.
In the meantime, I remain [etc.]
[File copy not signed]
The Secretary of
State to the Secretary of the Treasury
(
McAdoo)
Washington,
October 12,
1917.
Sir: I have the honor to acknowledge
the receipt of your Department’s letter of the 5th instant
enclosing a draft of a letter which the Treasury Department
proposes to send to the Cuban Minister at this capital regarding
the bonds which the Cuban Government expects to deliver to the
Government of the United States.
In reply I have the honor to say that this Department sees no
objection to the letter being sent as drafted. It is suggested,
however, in this relation that if there remains any doubt as to
the constitutionality of the Cuban law which authorized the
making of the loan in question, the matter should be cleared up
by subsequent legislation at the same time that the matter
referred to in the Treasury Department’s letter is passed upon
by the Cuban Congress.
I have [etc.]
